Target Exam

CUET

Subject

-- Accountancy Part B

Chapter

Accounting Ratios

Question:

Which of the following is the solvency ratio of a company?

A) Current ratio
B) Debt-equity ratio
C) Quick ratio
D) Proprietary ratio
E) Interest coverage ratio
F) Total Assets to Debt Ratio
G) Dividend per share

Choose the correct answer from the options given below.

Options:

ADEF

ACG

BDEF

ABCDE

Correct Answer:

BDEF

Explanation:

The correct answer is option 3- BDEF.

A) Current ratio- Liquidity ratio
B) Debt-equity ratio- Solvency ratio
C) Quick ratio- Liquidity ratio 
D) Proprietary ratio- Solvency ratio
E) Interest coverage ratio- Solvency ratio
F) Total Assets to Debt Ratio- Solvency ratio
G) Dividend per share- Profitability ratio

 

The persons who have advanced money to the business on long-term basis are interested in safety of their periodic payment of interest as well as the repayment of principal amount at the end of the loan period. Solvency ratios are calculated to determine the ability of the business to service its debt in the long run. The following ratios are normally computed for evaluating solvency of the business.
1. Debt-Equity Ratio;
2. Debt to Capital Employed Ratio;
3. Proprietary Ratio;
4. Total Assets to Debt Ratio;
5. Interest Coverage Ratio.